Tax Incentives for Group Health, Dental, and Life Insurance

We’re not lawyers or accountants, and we don’t give legal or tax advice. We can, however, quote from IRS and California EDD publications that describe how California health and dental insurance employee benefits are treated for tax purposes. (For an example of the tax impact of an employer paying for health plans see above, The Problem with Paying Health Insurance by a Salary Bonus.)

As you can see below, the tax treatment of these benefits provides a valuable incentive to employers to pay for employee health, dental, and life insurance plans. Tax laws allow you to pay your employees with benefits without you or your employees having to pay taxes on those benefits.

Federal Tax Treatment

“California Health Insurance Group Plans: If you pay the cost of an accident or health insurance plan for your employees, which may include an employee’s spouse and dependents, your payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding. Generally, this exclusion applies to qualified long-term care insurance contracts.”

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